Weitz Co., LLC v. Mid-Century Ins. Co.

• Decision Date: 09 August 2007
• Docket Number: No. 06CA0163.,06CA0163.
• Citation: 181 P.3d 309
• Parties: WEITZ COMPANY, LLC, an Iowa Limited Liability Company, Plaintiff-Appellant, v. MID-CENTURY INSURANCE COMPANY, a California Corporation, Defendant-Appellee.
• Court: Colorado Court of Appeals

181 P.3d 309

WEITZ COMPANY, LLC, an Iowa Limited Liability Company, Plaintiff-Appellant, v. MID-CENTURY INSURANCE COMPANY, a California Corporation, Defendant-Appellee.

No. 06CA0163.

Colorado Court of Appeals, Div. III.

August 9, 2007.

Certiorari Denied April 7, 2008.

Sherman & Howard, L.L.C., Charlotte Wiessner, Bret R. Gunnell, Katherine D. Varholak, Denver, Colorado, for Plaintiff-Appellant.

Lambdin & Chaney, LLP, Suzanne Lambdin, Laura Trask Schneider, Denver, Colorado, for Defendant-Appellee.

Holley, Albertson & Polk, P.C., Dennis B. Polk, Eric E. Torgersen, Golden, Colorado, for Amicus Curiae Colorado Association of Home Builders.

Zupkus & Angell, P.C., Richard L. Angell, Denver, Colorado, for Amicus Curiae Colorado Defense Lawyers Association.

Opinion by Judge ROY.

Plaintiff, Weitz Company, LLC (the general contractor), appeals the trial court's summary judgment in favor of defendant, Mid-Century Insurance Company, a Farmers Insurance Group Company (the insurer). The controlling question on appeal is whether an additional insured endorsement, limiting the additional insured's coverage to "ongoing operations," includes "completed operations" or "completed work" coverage. We answer the question in the negative and affirm the trial court's judgment.

In September 1998, a developer-owner hired the general contractor to construct an office building in Littleton, Colorado (the project). The general contractor contracted with RK Mechanical, Inc. (the subcontractor) to install the plumbing, heating, and air conditioning systems, including the roof and perimeter drains.

The subcontract required that the subcontractor procure a commercial general liability insurance policy written on an occurrence basis, covering completed operations, and listing the general contractor as an additional insured "using [Insurance Services Offices, Inc. (ISO)] additional insured endorsement (CG 20 10), edition date 10/93, or its equivalent." In addition, the contract required "[s]ubcontractor [to] continue this coverage for at least 2 years following final payment to Contractor in connection with the Project."

The subcontractor commenced work on or about October 27, 1998, and completed its work no later than June 3, 1999, when a certificate of occupancy for the building was issued. On November 11, 1999, the property owner observed property damage allegedly related to water intrusion, including the heaving of floor slabs and the resulting damage to drywall and floors.

The subcontractor purchased the commercial general liability policy at issue here from the insurer following the completion of the project in apparent compliance with its obligation to continue coverage for two years following final payment. The subcontractor's insurance policy in effect during construction, if any, is not before us.

The policy had a policy period "from 4/30/00 ... to 4/30/01"; insured the subcontractor for "completed operations"; and included an additional insured endorsement (CG 20 10), edition date 10/93 (the endorsement). The endorsement states: "WHO IS AN INSURED (Section II) is amended to include as an insured the person or organization shown in the Schedule, but only with respect to liability arising out of your ongoing operations performed for that insured." (Emphasis added.) The endorsement is promulgated by the Insurance Services Office (ISO), which is an insurance industry-supported organization that develops standard insurance policy language. 4 Phillip L. Brunner & Patrick J. O'Connor, Jr., Construction Law § 11:6, at 1921 (2002).

Approximately two years after completion of the subcontractor's work, the property owner filed an action against the general contractor alleging construction defects. The subcontractor was not named in that action, and the general contractor did not add or join it. Following the general contractor's tender of defense, the insurer agreed to defend with reservations. Notwithstanding the insurer's limited offer, the general contractor was defended and indemnified by its own commercial general liability insurer, and that matter settled.

The general contractor then commenced these proceedings asserting claims for breach of contract, bad faith breach of insurance contract, and deceptive trade practices against three subcontractors, including the subcontractor, and their respective commercial general liability carriers, including the insurer. The subcontractor was, by stipulation, dismissed with prejudice.

The insurer filed a motion for summary judgment asserting that there was no coverage because the endorsement was limited to "ongoing operations" and, therefore, did not include coverage for claims arising out of the subcontractor's completed work or operations. The trial court granted the motion.

I. Standard of Review

Summary judgment is appropriate when the pleadings, affidavits, depositions, or admissions establish that there is no genuine issue of material fact and that the moving party is entitled to judgment as a matter of law. Cung La v. State Farm Auto. Ins. Co., 830 P.2d 1007, 1009 (Colo.1992). We review a grant of summary judgment de novo. Vail/Arrowhead, Inc. v. Dist. Court, 954 P.2d 608, 611 (Colo.1998).

Interpretation of an insurance contract, including whether contract provisions are ambiguous, is a matter of law which we review de novo. Compass Ins. Co. v. City of Littleton, 984 P.2d 606, 613 (Colo.1999); Prudential Prop. & Cas. Ins. Co. v. LaRose, 919 P.2d 915, 916 (Colo.App.1996).

II. Rules of Insurance Policy Interpretation

An insurer's duty to defend arises when the underlying complaint alleges facts that might fall within the coverage of the policy. Cyprus Amax Minerals Co. v. Lexington Ins. Co., 74 P.3d 294, 300 (Colo.2003); Compass Ins. Co. v. City of Littleton, supra, 984 P.2d at 613. When determining whether an insurer has a duty to defend, a trial court must restrict its examination to the four corners of the underlying complaint. McGowan v. State Farm Fire & Cas. Co., 100 P.3d 521, 523 (Colo.App.2004).

An insurer seeking to avoid a duty to defend "bears a heavy burden" of establishing that the allegations in the complaint are not covered by the policy because they are "solely and entirely within the exclusions in the insurance policy" and the exclusions "are not subject to any other reasonable interpretations." Hecla Mining Co. v. New Hampshire Ins. Co., 811 P.2d 1083, 1089-90 (Colo. 1991).

An insurance policy is a contract and should be interpreted consistently with the well-settled principles of contractual interpretation. In contract interpretation, we begin by giving words used their plain and ordinary meaning unless the intent of the parties, as expressed in the contract, indicates that an alternative interpretation is intended. Courts should not rewrite clear and unambiguous contract provisions. Chacon v. Am. Family Mut. Ins. Co., 788 P.2d 748, 750 (Colo.1990); see also Allstate Ins. Co. v. Huizar, 52 P.3d 816, 819 (Colo.2002). Dictionaries may be used to assist in the determination of the plain and ordinary meaning of words. Hecla Mining Co. v. New Hampshire Ins. Co., supra, 811 P.2d at 1091.

Ambiguous terms in an insurance policy are construed against the insurer. Thompson v. Maryland Cas. Co., 84 P.3d 496, 501-02 (Colo.2004). A policy provision is ambiguous when it is reasonably susceptible of more than one meaning. Ballow v. PHICO Ins. Co., 875 P.2d 1354, 1359 (Colo.1993). Courts will not force an ambiguity in an insurance contract in order to resolve it against the insurer. Martinez v. Hawkeye-Security Ins. Co., 195 Colo. 184, 188, 576 P.2d 1017, 1019 (1978).

An insurance policy and an endorsement attached to it must be considered as a single instrument, and they should be construed together in the absence of an internal conflict that cannot be reconciled. The language in the endorsement, being the later expression of intent, prevails if the language of the two conflicts. Martinez v. Hawkeye Security Ins. Co., supra, 195 Colo. at 187, 576 P.2d at 1019.

III. Ongoing or Completed Operations Coverage

As previously indicated, the controlling question presented here is whether the endorsement that extends coverage to the general contractor against its liability "arising out of [the subcontractor's] ongoing operations" also insures the general contractor against liability arising out of the subcontractor's "completed operations."

We and the parties have found only two cases discussing the additional insured endorsement at issue here. The first is Pardee Construction Co. v. Insurance Co. of the West, 77 Cal.App.4th 1340, 92 Cal.Rptr.2d 443 (2000); and the second is Valley Insurance Co. v. Wellington Cheswick, LLC, 2006 WL 3030282 (W.D.Wash. No. C051886RSM, Oct. 20, 2006) (unpublished order), vacated, 2007 WL 1531674 (W.D.Wash. No. C051886RSM, May 24, 2007) (unpublished order). The discussion in Pardee is dictum.

We acknowledge Valley Insurance, however, because the opinion was vacated we conclude that it has very limited value as precedent. Further, we find it unpersuasive because, while it relies on the definitions of "ongoing" and "operations," as do we, it does not, ultimately, treat them as a phrase or construe the phrase in the context of the policy there at issue.

In Pardee, a construction defect case, the general contractor's contract required the subcontractors to name it as an additional insured on their commercial general liability policies including completed work coverages. The subcontractors complied; however, as here, the relevant policies were issued following the completion of the project. Also, the additional insured endorsements were not limited, as here, to "ongoing operations" but instead specified "operations," as well as "all operations." The owner there sued for construction defects, and the general contractor submitted the litigation to several subcontractors' carriers for a defense and indemnification. The defect action named each...